AbbVie lays out rationale for merger with Shire

Despite having been turned down three times already, AbbVie is not given up on its quest to acquire Shire and has made its case for doing a deal.

Last week, Shire turned down the latest offer from AbbVie worth about $46 per share and laid out plans to double revenues to $10 billion by 2020 while continuing to operate as an independent entity. Now the US firm has made its own appeal to the investment community and asked Shire’s management to come to the table.

AbbVie says the proposed combination is “strategically compelling” to both parties and would create “a larger and more diversified biopharmaceutical company with multiple leading franchises and significant financial capacity for future acquisitions, investment and enhanced shareholder distributions and value creation”. It claims to offer Shire shareholders “immediate value with significant future upside potential” from ownership in ‘new AbbVie’, which would be incorporated in Jersey and have a UK tax domicile, with operational headquarters remaining in Chicago.

In terms of price, AbbVie says that while it “appreciates and values the potential of Shire’s pipeline”, the recent rises in the latter’s share price “already incorporates a meaningful premium resulting from M&A market speculation”. Most analysts are less convinced, however, and a figure close to $55 per share may be required.

AbbVie chief executive Richard Gonzalez said the firm’s strategy “positions us to deliver strong performance with a robust late-stage pipeline of multiple potential blockbuster medicines, including in oncology, our hepatitis C regimen and daclizumab for multiple sclerosis”. He added that his team “has a strong track record of successful M&A, licensing and integration of assets”, claiming that the firm could “maximise the potential of Shire’s rare disease and neuroscience franchises through our complementary platform, with established presence in more than 170 countries”.

AbbVie concluded by saying it is “willing to move quickly and cooperatively to engage with Shire with a view to achieving a transaction”.

Shire unmoved

Shire responded by saying that the announcement by AbbVie “contains no new proposal and provides no material new information”. It said that the board “has already considered this proposal in detail and unanimously rejected it, concluding that it fundamentally undervalued the company and its prospects”.

The Irish-domiciled company, which “strongly advised” its shareholders to take no action, was boosted earlier in the day with a key US patent ruling in its favour on the attention-deficit hyperactivity disorder drug Vyvanse ((lisdexamfetamine dimesylate). Analysts at Barclays said that with Vyvanse making up 30% of the firm’s earnings, “a stronger case for 2023 expiry reduces uncertainty for a potential buyer and adds weight to Shire’s assertion of its fundamental valuation.”